Economic Policy Review ISSN 1313 - 0544

On 27th of May We Celebrate Government Freedom Day!

Author: Adriana Mladenova / 05.02.2009
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According to calculations by the Institute for Market Economy, 27th of May 2009 is the Government Freedom Day in Bulgaria. On that date we would celebrate the day when the people symbolically stop working for the Government and start working for themselves.

On average 147 days are required for the taxpayers to earn and afford the planned state revenues in the state budget for this year. Figure 1 shows the number of days on average Bulgarians work to pay various taxes and quasi-taxes which the government collects. Most, 46 days during the year we work to pay the VAT, 30 days - for the social security and healthcare payments, 25 days - for direct taxes (income tax and corporate tax), 21 day - for excise duties and 25 days - for other revenues such as local taxes, fees, duties, etc.  

Figure 1: Days Bulgarians Work to Pay Taxes

Source: IME

In the macroeconomic language the date 27th of May is equal to a redistribution by the state in the economy of about 40.2% of the GDP. This figure does not include opportunity costs and losses for the economy from the regulation burden on the business. In the middle of a global economic crisis it is a must to rethink the role of the state within the framework of taking income from the people and the businesses and reduction of the bureaucratic burden.  

In their study Tax stimuli as a response to the crisis Simeon Djankov and George Angelov show that the reduction of the tax burden and the respective reduction of the government size as a percentage of the GDP by rationalizing and elimination of the unnecessary public spending could stimulate the economy and give some air to the business and the people to manage easier the negative effects from the financial crisis. The positive effects from such a policy are greater employment, more production, and greater economic growth as compared to a policy when the Government passes a package of fiscal measures for distributing subsidies and aid to selected target groups[1]. The latter policy is leading to greater interference in the economy and less freedom for the people, because we should not forget, that there is no free lunch - every lev which the bureaucrats distribute to various public programs must first be earned by us, the taxpayers.   

[1] Comments related to the negative effects from the fiscal stimuli, which are discussed in the USA with reference to the crisis, could be red in the paper of Frank Shostak on the web page of the  Mises Institute.